FCC Votes to Give Carriers More USF Flexibility

Continuing its work to expand broadband access in rural areas, the FCC amended its rules to help bring high-speed internet to locations that are very costly to serve. The change allows carriers greater flexibility in planning deployment projects that are funded by the high-cost Universal Service support program.

Under the current rules, high-cost carriers lose all universal support for capital expenses on a construction project if the average costs per location exceeds a company-specific threshold. This encouraged carriers to exclude certain high cost homes from a project entirely, even if including those homes would be more efficient. Commissioners Thursday described this as an unintended result of changes they passed in 2016.

The FCC’s March 2016Rate-of-Return Reform Orderlimited reimbursement of capital expenditures by the high-cost program. The goal was to preserve universal service funds for more efficient projects with deployment to a greater number of lower-cost locations. However construction projects that exceed the cap were denied subsidies completely.

Under the old rules, for example, if a carrier’s average per location cap is $5,000 and a project cost $50,500 to serve 10 locations, the cost of the entire project would be disallowed. As a result, the high-cost locations might never receive broadband-capable service.

The change adopted yesterday allows carriers to pay for the portion of the excess capital expenditure with their own funds, rather than disallowing support for the project altogether, while continuing to promote the efficient use of universal service.

USTelecom welcomed the change, saying it will allow carriers to receive USF support for capital expenses, even if the costs of expanding service to an individual project exceeds the company’s average funding limit. “Fixing this quirk in the rule will help spread deployment to the highest cost portion of rural America in dire need of access to broadband,” said USTelecom CEO Jonathan Spalter.

NTCA–The Rural Broadband Association thanked the FCC for correcting a “flaw” in the USF capital investment allowance cap, saying it is “significant in removing a disincentive to broadband investment and allowing greater flexibility for smaller companies to design their networks to reach more consumers.” The association looks forward to in-depth conversations on other items mentioned, including the rate floor and ‘punch list’ of other issues still teed up by NTCA’s Petition for Reconsideration, according to NTCA SVP Industry Affairs and Business Development Michael Romano.